Policy Impact on Economic Viability of Biomass Gasification Systems in Indonesia

Abstract

Indonesia is facing challenges on the lack of electricity access in rural areas and the management of agricultural waste. The utilization of waste-to-energy technology can help in mitigating these issues. The aim of this paper is to assess the economic viability of a biomass gasification system for rural electrification by investigating its competitiveness in relation to various government supports. Financial modelling is applied to calculate Net Present Value (NPV), Internal Rate of Return (IRR), and Levelized Cost of Electricity (LCOE). NPV and IRR results indicate that biomass gasification is an economically viable option when appropriate financial government supports exist. LCOE result indicates that biomass gasification system is already more economically competitive compared to diesel generator even without additional support but it is less competitive compared to the national electricity grid tariff. In conclusion, the biomass gasification system is an economically viable option for rural electrification in Indonesian context.